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A truly sustainable primary sector for New Zealand

A truly sustainable primary sector for New Zealand

Acting Prime Minister's Opening Speech to Primary Industries 2020 - The Primary Industries Summit, Christchurch


Good morning to all of you and welcome to Primary Industries 2020 - the Primary Industries Summit.

I want to start by passing on a welcome from Prime Minister Helen Clark. She is unable to open today's summit as she is in Germany where she has been meeting with Chancellor Angela Merkel - and I am sure discussing many of the same issues that will be debated here over the next two days.

It was in May's Budget that Jim Anderton and I announced the Labour-led government would invest in a summit to explore how our primary industries - the powerhouses of our economy and the drivers of much of our prosperity - could continue to succeed in a changing global economy.

In many ways this is a topic that is not particularly new. The primary industries in New Zealand have been, from the very beginning of our colonial history, well-attuned to succeeding in a global economy. Generations upon generations of New Zealand farmers, foresters, and family fishing operations have learned how to compete in a global marketplace, how to develop new export markets, how to weather international downturns, and how to quickly seize new opportunities as they arise.

But the truth about the global economy is that the process of change is constant. Every generation must address the new challenges that every period of change brings.

And in New Zealand, our primary industries have risen to many challenges.

From the disruption to global trade during two world wars, to the huge hit to our export market following Britain's accession to the European Community, to the economic reforms of the 1980s and 90s, we have been forced to find new ways to succeed time and time again.

And our primary sector has emerged as, I believe, one of the strongest, most nimble, and efficient of any primary sector in the world.

But change continues, and is now quickening. What I want to do in my comments today is briefly explain the shape of the current wave of globalisation and the ways we must transform our economy to respond to it. I want to talk about the role of sustainable practice in guiding the process of economic transformation. And I want to talk about the leadership our primary industries can and must provide for the whole of the economy if we are to succeed as I believe we can.

The challenge I want to lay down for this summit and for our primary industries as whole is more than just how can we succeed in a changing global economy.

We need New Zealand's primary industries to be at the very centre of our effort to become the world's first truly sustainable nation.

There is no reason why our farmers, our horticulturalists, our fishing fleets, and our foresters cannot lead the world in developing and implementing sustainable practice. And there is no reason that in doing so, that our primary industries cannot lead New Zealand's economic transformation.

The opportunities presented by sustainability are huge, and as I will argue, the consequences for not grasping them are serious and very real.

It is impossible to understand that balance between need and opportunity without appreciating the intensity and pace of the current wave of globalisation.

Globalisation is often discussed as if it is something new, when in fact, global economic integration is a centuries old process. Our primary industries, who have been sending food and raw materials to the world for generations know this better than most.

But there is no question that today's wave of globalisation is different.

It is faster - the pace at which tariff barriers are falling and at which firms are expanding their global operations is faster than at any time in our history.

It is deeper - the links between economies, governments, and societies do not stop at formal high-level interactions and major trade deals. Families are travelling back and forth across borders and teenagers are buying everything from music to shoes online from different sides of the planet. Our access to information and entertainment from other countries is increasing at seems like an exponential rate.

And it is bringing nations and economies closer to each other than ever before. The economic successes and failures of nations are increasingly collective. We can do all we can to plan and succeed, but when our partners falter, we will pay a price.

All of this means that New Zealand must play a different game than we have in the past.

Government policies and business practices must focus on smart expansion. The question of how we seize global opportunities while maintaining vital insulation from global shocks matters now, but it will only grow in importance into the future.

The need for sound, long-term economic management is more important than ever. We must send strong signals to the global market that our macroeconomic settings are sound and that we are serious about long-term investment in infrastructure. We need to do everything we can to invest in the skills of our people and to guard against the risk of rising inequality that is a potential consequence of greater exposure to global forces.

If we want to set our own economic direction, we must do everything we can to address the imbalances in our economy, including our unsustainably high current account deficit. There is no question in my mind that we won't see a structural improvement in our current account deficit without addressing our embarrassingly low national savings rate. We also know that, over time, higher saving would see a lower equilibrium real exchange rate. This why the Labour-led government has made KiwiSaver such a major priority.

If we want our firms to be ahead of their overseas competitors, we need to make sure businesses are supported to invest in research and development and that they are given support to develop overseas markets and expand their global operations. This is why we made Business Tax reform, research and development tax credits, and market development assistance centrepieces of Budget 2007.

But beyond anything else, we must realise that our ambitions in a period of increased and quickening globalisation cannot be narrow. We have a real opportunity to build unprecedented prosperity for all New Zealanders and we must seize it. If we shun ambition and continue to cling to the constructs and constraints of the past, then we will suffer significantly.

New Zealand's sights must be nothing short of the transformation of our economy.

And there can be no question that it is our primary industries that must lead the way in that endeavour. As Jim Anderton likes to remind me and my colleagues, only our primary industries have the global scale, sophistication and competitive advantage to lead the process of transformation. You need no better example of that power than the recent record dairy profits, which I believe will have a tremendous impact on our rural economies and communities, with benefits for all New Zealanders.

The question for all of you then is, what will New Zealand's primary industries look to as a guide for this transformation. Transformation does not happen automatically or passively - it will occur only with a plan and only with a consensus about what we are trying to achieve.

We must build a common understanding of what our touchstone for economic transformation is to be.

In answering that question, it is helpful to recognise that the transformation process - like globalisation - is not new. It is ongoing.

Over the last quarter century New Zealand has seen two distinct periods of transformation. The first, beginning in 1984 and lasting through the 1990s, saw tariff barriers fall, agricultural subsidies eliminated, and our previously closed economy opened to the global market. It unfortunately also saw a huge increase in poverty, stubbornly high unemployment, and a general decline in the principle of fairness that had underpinned the New Zealand economy for generations.

The industries represented in this room today felt some of the sharpest edges of this period. Although the New Zealand primary sector that emerged is arguably one of the world's strongest and most competitive, there can be no denial of the pain felt at the time.

The second phase of transformation, beginning with the election of the Fifth Labour Government in 1999, has sought to restore the place of fairness in our economy. By focusing on fair labour laws, support for families and seniors, and investing in skills and education, we have achieved a great deal.

.At 3.5 per cent our unemployment rate is the lowest on record and the envy of the developed world
.360,000 jobs have been created and more New Zealanders are in work than ever before
.We have seen the longest period of sustained economic growth in more than a generation
.New Zealand's GDP is now 28 per cent larger in real terms than it was in 1999
.Wages are up and profits are up more
.Work stoppages are down
.Over 100,000 children have been lifted out of poverty
.Regional economies that were in decline are now thriving

And as a result of this success, we can broaden our sights even further. It is now time to begin a new wave of economic transformation, and to add an additional guiding principle to our economic direction.

The Labour-led government believes that identifying that principle is easy.

If the first wave of economic transformation applied only a policy test of growth, and if the second wave added a focus on fairness, the next wave of transformation will be about building an economy that is strong, fair, and sustainable.

I believe that pursuing sustainability is an enormous economic opportunity for New Zealand. We have a real chance to be an example to the rest of the world on how to deliver more jobs, higher wages, and higher profits all while protecting the environment.

Already we are seizing this opportunity.

Our primary sector industries are supporting the research and innovation which will help lower their greenhouse gas emissions.

The wine industry wants all its businesses in accredited sustainability schemes by 2012.

Air New Zealand is trialling biofuels.

The tourism industry has put sustainability at the heart of their new strategy released earlier this month.

New Zealand farmers are already among the best in the world at producing the maximum amount of food with the smallest carbon footprint.

What is interesting about all of this is that it is happening before the government is introducing a price on carbon through the Emissions Trading Scheme. Businesses and communities in New Zealand are leading the world in sustainability and pushing ahead with a transformation of our economy as we speak.

This is happening because in New Zealand we are quickly recognising that sustainability has the potential to deliver real gains. It will lead to new markets, new marketable advantages, increased productivity, and better living standards for our people.

It is also happening because sustainability is now no longer a choice, it is a necessity. In particular, New Zealanders now know that the threat of climate change is real and requires us all to act.

Some of the clearest evidence of this came from the Stern Review, released in October last year. It showed that if climate change is left uncontrolled, global GDP could fall by as much as 20 per cent per head. Primary industries will bear the largest economic burden of climate change and countries like New Zealand that are so dependent on our primary sector are particularly vulnerable.

It is true that New Zealand is only a very small contributor to global emissions. But those who are still calling for New Zealand to free ride on the back of the efforts of other nations completely misunderstand the way climate change is influencing purchasing decisions around the world and will increasingly influence the competitiveness of firms.

There is a growing understanding of the challenges posed to our exporters by the misleading food miles debate, which must be seen as a very serious warning. We all know that the food miles debate is nothing more than neo-protectionism. A Lincoln University report completed last year showed that our agricultural exports result in fewer emissions than the same primary products in Europe, even when you account for travel distances to eventual markets.

When food miles first gained a significant profile last year, Jim Anderton and Trade Minister Phil Goff wasted no time in moving to point out the argument's illogical foundations. Both here and overseas, the Ministers made it clear that New Zealand would not allow a new wave of protectionism to be built up against our agricultural commodities.

You can be sure that our government will continue to fight against the threat that ill-informed constructions like food miles pose to our primary sector - just last week Jim Anderton stepped up to challenge ill-informed claims from Heather Mills about the alleged evils of dairy exports.

But the lesson of food miles is a serious one that is not going away.

Our long-term economic competitiveness will be increasingly grounded in the success of our clean and green national branding. If we expect people to continually buy our products, if we want a steady increase in the number of foreign tourists who fly to New Zealand, and if we want to be seen as an acceptable place for foreign investment, we cannot allow any questions about our sustainable credentials to linger.

We must pursue sustainability in every way and we must be seen internationally to be pursuing sustainability in every way.

The threat is real - to our economy, to our environment, and to our way of life. And it is leadership on all levels - from families, from business, and from government - that is required to combat it.

The announcements made by the government over the past few months are fundamentally about supporting this leadership.

The Emissions Trading Scheme is a major step forward in our efforts. What will make our scheme world-leading is its comprehensive nature. It will include all sectors of our economy and all greenhouse gas emissions.

I am confident it will be a topic of discussion by all the summit's participants.

As I have said, New Zealand's primary sector must lead on sustainability if our pursuit of sustainable economic transformation is to be anything other than rhetoric. I know that the phrase 'economic transformation' often conjures up images of telecommunications, high-speed broadband, and digital graphics. And you can be sure the government intends to focus on these and other areas of the economy.

But it is our farms, our forests, our rivers, lakes, and seas that will be the true drivers of the next wave of New Zealand's transformation, just as they have been in the past.

And we can consider ourselves very fortunate that our primary sector has a head start on the rest of the world in implementing sustainable practice. You are one of the most productive, most efficient, and most sustainable primary sectors in the world.

What we need to do now is to raise the bar still higher. If New Zealand is to be the world's first truly sustainable nation, then we need to have the world's first truly sustainable primary sector.


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